ALPHA & OMEGA SEMICONDUCTOR Ltd

Previous wording

We are a designer, developer and global supplier of a broad portfolio of power semiconductors. Our portfolio of power semiconductors includes approximately 2,600 products, and has grown significantly with the introduction of over 60 new products in the fiscal year ended June 30, 2023, and over 130 and 160 new products in the fiscal years ended June 30, 2022 and 2021, respectively. During the nine months ended March 31, 2024, we introduced an additional 80 new products. Our teams of scientists and engineers have developed extensive intellectual property and technical knowledge that encompass major aspects of power semiconductors, which we believe enables us to introduce and develop innovative products to address the increasingly complex power requirements of advanced electronics. We have an extensive patent portfolio that consists of 931 patents and 43 patent applications in the United States as of March 31, 2024. We also have a total of 1,009 foreign patents, which were based primarily on our research and development efforts through March 31, 2024. We differentiate ourselves by integrating our expertise in technology, design and advanced manufacturing and packaging to optimize product performance and cost. Our portfolio of products targets high-volume applications, including personal computers, graphic cards, game consoles, flat panel TVs, home appliances, power tools, smart phones, battery packs, consumer and industrial motor controls and power supplies for TVs, computers, servers and telecommunications equipment.

Current wording

We are a designer, developer and global supplier of a broad portfolio of power semiconductors. Our portfolio of power semiconductors includes approximately 2,700 products, and has grown significantly with the introduction of over 100 new products in the fiscal year ended June 30, 2024, and over 60 and 130 new products in the fiscal years ended June 30, 2023 and 2022, respectively. During the three months ended September 30, 2024, we introduced an 29 new products. Our teams of scientists and engineers have developed extensive intellectual property and technical knowledge that encompass major aspects of power semiconductors, which we believe enables us to introduce and develop innovative products to address the increasingly complex power requirements of advanced electronics. We have an extensive patent portfolio that consists of 935 patents and 53 patent applications in the United States as of September 30, 2024. We also have a total of 1,039 foreign patents, which were based primarily on our research and development efforts through September 30, 2024. We differentiate ourselves by integrating our expertise in technology, design and advanced manufacturing and packaging to optimize product performance and cost. Our portfolio of products targets high-volume applications, including personal computers, graphic cards, game consoles, flat panel TVs, home appliances, power tools, smart phones, battery packs, consumer and industrial motor controls and power supplies for TVs, computers, servers and telecommunications equipment.

Previous wording

On December 1, 2021 (the “Effective Date”), Alpha & Omega Semiconductor (Shanghai) Ltd. (“AOS SH”) and Agape Package Manufacturing (Shanghai) Limited (“APM SH” and, together with AOS SH, the “Sellers”), each a wholly-owned subsidiary of the Company, entered into a share transfer agreement ("STA") with a third-party investor to sell a portion of the Company's equity interest in the JV Company which consists of a power semiconductor packaging, testing and 12-inch wafer fabrication facility in Chongqing, China (the “Transaction”). The Transaction closed on December 2, 2021 (the “Closing Date”), which reduced the Company’s equity interest in the JV Company from 50.9% to 48.8%. Also, the Company’s right to designate directors on the board of JV Company was reduced to three (3) out of seven (7) directors, from four (4) directors prior to the Transaction. As a result of the Transaction and other factors, the Company no longer has a controlling financial interest in the JV Company. The JV Company was deconsolidated from the Company’s Consolidated Financial Statements effective as of the Closing Date.

Current wording

On December 1, 2021 (the “Effective Date”), Alpha & Omega Semiconductor (Shanghai) Ltd. (“AOS SH”) and Agape Package Manufacturing (Shanghai) Limited (“APM SH” and, together with AOS SH, the “Sellers”), each a wholly-owned subsidiary of the Company, entered into a share transfer agreement (“STA”) with a third-party investor to sell a portion of the Company's equity interest in the JV Company which consists of a power semiconductor packaging, testing and 12-inch wafer fabrication facility in Chongqing, China (the “Transaction”). The Transaction closed on December 2, 2021 (the “Closing Date”), which reduced the Company’s equity interest in the JV Company from 50.9% to 48.8%. Also, the Company’s right to designate directors on the board of JV Company was reduced to three (3) out of seven (7) directors, from four (4) directors prior to the Transaction. As a result of the Transaction and other factors, the Company no longer had a controlling financial interest in the JV Company. The JV Company was deconsolidated from the Company’s Consolidated Financial Statements effective as of the Closing Date.

Previous wording

In February 2024, the JV Company repurchased certain shares that were previously issued to employees under the employee equity incentive plan for $5.4 million, which increased the Company’s percentage of equity ownership in the JV Company by 0.54%. As of March 31, 2024, the percentage of outstanding JV equity interest beneficially owned by the Company was 42.8%.

Current wording

In February 2024, the JV Company repurchased certain shares that were previously issued to employees under the employee equity incentive plan, which increased the Company’s percentage of equity ownership in the JV Company by 0.54%. As of September 30, 2024, the percentage of outstanding JV equity interest beneficially owned by the Company was 42.8%.

Previous wording

We reduced our ownership of the JV Company to below 50% to increase the flexibility of the JV Company to raise capital to fund its future expansion. The JV Company is also contemplating an eventual listing on the Science and Technology Innovation Board, or STAR Market, of the Shanghai Stock Exchange. The reduction of our ownership assists the JV Company in meeting certain regulatory listing requirements. A potential STAR Market listing may take several years to consummate and there is no guarantee that such listing by the JV Company will be successful or will be completed in a timely manner, or at all. In addition, the JV Company will continue to provide us with significant level of foundry capacity to enable us to develop and manufacture our products. On July 12, 2022, the current shareholders of the JV Company entered into a shareholders contract, pursuant to which the JV Company provided us with a monthly wafer production capacity guarantee, subject to future increase when the JV Company’s production capacity reaches certain specified level.

Current wording

We reduced our ownership of the JV Company to below 50% to increase the flexibility of the JV Company to raise capital to fund its future expansion. The JV Company is also contemplating an eventual listing on the Science and Technology Innovation Board, or STAR Market, of the Shanghai Stock Exchange. The reduction of our ownership assists the JV Company in meeting certain regulatory listing requirements. A potential STAR Market listing may take several years to consummate and there is no guarantee that such listing by the JV Company will be successful or will be completed in a timely manner, or at all. In addition, the JV Company will continue to provide us with significant level of foundry capacity to enable us to develop and manufacture our products. On July 12, 2022, the current shareholders of the JV Company entered into a shareholders contract, pursuant to which the JV Company committed to provide us with a monthly wafer production capacity until December 2023, and additional commitment to provide wafer capacity after December 2023 if the JV Company’s production capacity reaches certain specified level.

Previous wording

Manufacturing costs and capacity availability: Our gross margin is affected by a number of factors including our manufacturing costs, utilization of our manufacturing facilities, the product mixes of our sales, pricing of wafers from third party foundries and pricing of semiconductor raw materials. Capacity utilization affects our gross margin because we have certain fixed costs at our Shanghai facilities and our Oregon Fab. If we are unable to utilize our manufacturing facilities at a desired level, our gross margin may be adversely affected. In addition, from time to time, we may experience wafer capacity constraints, particularly at third party foundries, that may prevent us from meeting fully the demand of our customers. For example, the recent global shortage of semiconductor manufacturing capacity has provided us with both challenges and opportunities in the market, and highlighted the importance of maintaining sufficient and independent in-house manufacturing capabilities to meet increasing customer demands. While we can mitigate these constraints by increasing and re-allocating capacity at our own fab, we may not be able to do so quickly or at sufficient level, which could adversely affect our financial conditions and results of operations. In addition, we enhanced the manufacturing capability and capacity of our Oregon Fab by investing in new equipment and expanding our factory facilities, which we expect will have a positive impact on our future new product development and revenue, particularly during the period of global shortage of capacity. We also rely substantially on the JV Company to provide foundry capacity to manufacture our products, therefore it is critical that we maintain continuous access to such capacity, which may not be available at sufficient level or at a pricing terms favorable to us because of lack of control over the JV Company’s operation. We continue to maintain a business relationship with the JV Company to ensure uninterrupted supply of manufacturing capacity. On July 12, 2022, we entered into an agreement with the JV Company, pursuant to which the JV Company agrees to provide us with a monthly wafer production capacity guarantee, subject to future increase when the JV Company’s production capacity reaches certain specified level. Because we continue to rely on the JV Company to provide us with manufacturing capacity, if the JV Company take actions or make decisions that prevents us from accessing required capacity, our operations may be adversely affected.

Current wording

Manufacturing costs and capacity availability: Our gross margin is affected by a number of factors including our manufacturing costs, utilization of our manufacturing facilities, the product mixes of our sales, pricing of wafers from third party foundries and pricing of semiconductor raw materials. Capacity utilization affects our gross margin because we have certain fixed costs at our Shanghai facilities and our Oregon Fab. If we are unable to utilize our manufacturing facilities at a desired level, our gross margin may be adversely affected. In addition, from time to time, we may experience wafer capacity

Previous wording

Erosion and fluctuation of average selling price: Erosion of average selling prices of established products is typical in our industry. Consistent with this historical trend, we expect our average selling prices of existing products to decline in the future. However, in the normal course of business, we seek to offset the effect of declining average selling price by introducing new and higher value products, expanding existing products for new applications and new customers and reducing the manufacturing cost of existing products. These strategies may cause the average selling price of our products to fluctuate significantly from time to time, thereby affecting our financial performance and profitability.

Current wording

Erosion and fluctuation of average selling price: Erosion of average selling prices of established products is typical in our industry. Consistent with this historical trend, we expect our average selling prices of our existing products to decline in the future. However, in the normal course of business, we seek to offset the effect of declining average selling price by introducing new and higher value products, expanding existing products for new applications and new customers and reducing the manufacturing cost of existing products. These strategies may cause the average selling price of our products to fluctuate significantly from time to time, thereby affecting our financial performance and profitability.

Previous wording

Distributor ordering patterns, customer demand and seasonality: Our distributors place purchase orders with us based on their forecasts of end customer demand, and this demand may vary significantly depending on the sales outlook and market and economic conditions of end customers. Because these forecasts may not be accurate, channel inventory held at our distributors may fluctuate significantly, which in turn may prompt distributors to make significant adjustments to their purchase orders placed with us. As a result, our revenue and operating results may fluctuate significantly from quarter to quarter. In addition, because our products are used in consumer electronics products, our revenue is subject to seasonality. Our sales seasonality is affected by numerous factors, including global and regional economic conditions as well as the PC market conditions, revenue generated from new products, changes in distributor ordering patterns in response to channel inventory adjustments and end customer demand for our products and fluctuations in consumer purchase patterns prior to major holiday seasons. In recent periods, broad fluctuations in the semiconductor markets and the global and regional economic conditions, in particular the decline of the PC market conditions, have had a more significant impact on our results of operations than seasonality. Furthermore, our revenue may be impacted by the level of demand from our major customers due to factors outside of our control. If these major customers experience significant decline in the demand of their products, encounter difficulties or defects in their products, or otherwise fail to execute their sales and marketing strategies successfully, it may adversely affect our revenue and results of operations.

Current wording

Distributor ordering patterns, customer demand and seasonality: Our distributors place purchase orders with us based on their forecasts of end customer demand, and this demand may vary significantly depending on the sales outlook and market and economic conditions of end customers. Because these forecasts may not be accurate, channel inventory held at our distributors may fluctuate significantly, which in turn may prompt distributors to make significant adjustments to their purchase orders placed with us. As a result, our revenue and operating results may fluctuate significantly from quarter to quarter. In addition, because our products are used in consumer electronics products, our revenue is subject to seasonality. Our sales seasonality is affected by numerous factors, including global and regional economic conditions as well as the PC market conditions, revenue generated from new products, changes in distributor ordering patterns in response to channel inventory adjustments and end customer demand for our products and fluctuations in consumer purchase patterns prior to major holiday seasons. In

Previous wording

Principal line items of condensed consolidated statements of income

Current wording

Principal line items of condensed consolidated statements of income (loss)

Previous wording

The following describes the principal line items set forth in our Condensed Consolidated Statements of Income.

Current wording

The following describes the principal line items set forth in our Condensed Consolidated Statements of Income (loss).

Previous wording

We generate revenue primarily from the sale of power semiconductors, consisting of power discretes and power ICs. Historically, a majority of our revenue has been derived from power discrete products. Because our products typically have three-year to five-year life cycles, the rate of new product introduction is an important driver of revenue growth over time. We believe that expanding the breadth of our product portfolio is important to our business prospects, because it provides us with an opportunity to increase our total bill-of-materials within an electronic system and to address the power requirements of additional electronic systems. In addition, a small percentage of our total revenue is generated by providing packaging and testing services to third parties through one of our subsidiaries.

Current wording

We generate revenue primarily from the sale of power semiconductors, consisting of power discretes and power ICs. Historically, a majority of our revenue has been derived from power discrete products. Because our products typically have three-year to five-year life cycles, the rate of new product introduction is an important driver of revenue growth over time. We believe that expanding the breadth of our product portfolio is important to our business prospects, because it provides us with an opportunity to increase our total bill-of-materials within an electronic system and to address the power requirements of additional electronic systems. In addition, a small percentage of our total revenue is generated by providing packaging and testing services to third parties through one of our in-house facilities.

Previous wording

Our product revenue is reported net of the effect of the estimated stock rotation returns and price adjustments that we expect to provide to our distributors. Stock rotation returns are governed by contract and are limited to a specified percentage of the monetary value of products purchased by the distributor during a specified period. At our discretion or upon our direct negotiations with the original design manufacturers (“ODMs”) or original equipment manufacturers (“OEMs”), we may elect to grant special pricing that is below the prices at which we sold our products to the distributors. In these situations, we will grant price adjustments to the distributors reflecting such special pricing. We estimate the price adjustments for inventory at the distributors based on factors such as distributor inventory levels, pre-approved future distributor selling prices, distributor margins and demand for our products.

Current wording

Our product revenue is reported net of the effect of the estimated stock rotation returns and price adjustments that we expect to provide to our distributors. Stock rotation returns are governed by contract and are limited to a specified percentage of the monetary value of products purchased by the distributor during a specified period. At our discretion or upon our direct negotiations with the original design manufacturers (“ODMs”) or original equipment manufacturers (“OEMs”), we may elect to grant special pricing that is below the prices at which we sold our products to the distributors. In certain situations, we will grant price adjustments to the distributors reflecting such special pricing. We estimate the price adjustments for inventory at the distributors based on factors such as distributor inventory levels, forecasted distributor selling prices, distributor margins and demand for our products.

Previous wording

In February 2023, we entered into a license agreement with a customer to license our proprietary SiC technology and to provide 24-months of engineering and development services for a total fee of $45.0 million, consisting of fees of $18.0 million, $6.8 million and $9.0 million paid to us in the March 2023, July 2023 and February 2024, respectively, with the remaining amount to be paid upon the achievement of specified engineering services and product milestones. The license and development fee is determined to be one performance obligation and is recognized over the 24 months during which we perform the engineering and development services. We use the input method to measure progression of the transfer of services. During the three and nine months ended March 31, 2024, we recorded $5.1 million and $16.2 million of license and development revenue, respectively. During the three and nine months ended March 31, 2023, the Company recorded $3.6 million of license and development revenue. As of March 31, 2024, we had recorded a total of $26.1 million of license and development revenue. We also entered an accompanying supply agreement to provide limited wafer supply to the customer.

Current wording

In February 2023, we entered into a license agreement with a customer to license our proprietary SiC technology and to provide 24-months of engineering and development services for a total fee of $45.0 million, consisting of an upfront fee and milestone payments of $18.0 million, $6.8 million and $9.0 million paid to us in the March 2023, July 2023 and February 2024, respectively, with the remaining amount to be paid upon the achievement of specified engineering services and product milestones. The license and development fee is determined to be one performance obligation and is recognized over the 24 months during which we perform the engineering and development services. We use the input method to measure progression of the transfer of services. During three months ended September 30, 2024 and 2023, we recorded $5.6 million and $5.6 million of license and development revenue, respectively. As of September 30, 2024, we had recorded a total of $36.8 million of license and development revenue. When our performance under the contract precedes our receipt of consideration from the customer, and the receipt of consideration is conditional upon factors other than the passage of time, a contract asset is recorded. We also entered an accompanying supply agreement to provide limited wafer supply to the customer.

Previous wording

We are subject to income taxes in various jurisdictions. Significant judgment and estimates are required in determining our worldwide income tax expense. The calculation of tax liabilities involves dealing with uncertainties in the application of complex tax regulations of different jurisdictions globally. We establish accruals for potential liabilities and contingencies based on a more likely than not threshold to the recognition and de-recognition of uncertain tax positions. If the recognition threshold is met, the applicable accounting guidance permits us to recognize a tax benefit measured at the largest amount of tax benefit that is more likely than not to be realized upon settlement with a taxing authority. If the actual tax outcome of such exposures is different from the amounts that were initially recorded, the differences will impact the income tax and deferred tax provisions in the period in which such determination is made. Changes in the location of taxable income (loss) could result in significant changes in our income tax expense.

Current wording

Significant judgment and estimates are required in determining our worldwide income tax expense. The calculation of tax liabilities involves dealing with uncertainties in the application of complex tax regulations of different jurisdictions globally. We establish accruals for potential liabilities and contingencies based on a more likely than not threshold to the recognition and de-recognition of uncertain tax positions. If the recognition threshold is met, the applicable accounting guidance permits us to recognize a tax benefit measured at the largest amount of tax benefit that is more likely than not to be realized upon settlement with a taxing authority. If the actual tax outcome of such exposures is different from the amounts that were initially recorded, the differences will impact the income tax and deferred tax provisions in the period in which such determination is made. Changes in the location of taxable income (loss) could result in significant changes in our income tax expense.

Previous wording

The Company is subject to income tax expense or benefit based upon pre-tax income or loss reported in the consolidated statements of income (loss) and the provisions of currently enacted tax laws. The parent company is incorporated under the laws of Bermuda and is subject to Bermuda law with respect to taxation. Under current Bermuda law, the Company is not subject to any income or capital gains taxes in Bermuda. As we have previously disclosed, the Government of Bermuda announced in December 2023 that it enacted the Corporate Income Tax Act 2023, potentially imposing a 15% corporate income tax (CIT) on Bermuda companies that are within the scope of the CIT, that will be effective for tax years beginning on or after January 1, 2025. In particular, the CIT applies to multinational companies with annual revenue of 750 million euros or more in the consolidated financial statements of the ultimate parent entity for at least two of the four fiscal years immediately preceding the fiscal year when the CIT may apply.

Current wording

The Company is subject to income tax expense or benefit based upon pre-tax income or loss reported in the consolidated statements of income (loss) and the provisions of currently enacted tax laws. The parent company is incorporated under the laws of Bermuda and is subject to Bermuda law with respect to taxation. Under current Bermuda law, the Company is not subject to any income or capital gains taxes in Bermuda. As we have previously disclosed, the Government of Bermuda announced in December 2023 that it enacted the Corporate Income Tax Act 2023, potentially imposing a 15% corporate income tax (CIT) on Bermuda companies that are within the scope of the CIT, that will be effective for tax years beginning on or after

Previous wording

We record our interest in the net earnings of the equity method investee, along with adjustments for unrealized profits or losses on intra-entity transactions and amortization of basis differences, within earnings or loss from equity interests in the Condensed Consolidated Statements of Income. Profits or losses related to intra-entity sales with the equity method investee are eliminated until realized by the investor or investee. Basis differences represent differences between the cost of the investment and the underlying equity in net assets of the investment and are generally amortized over the lives of the related assets that gave rise to them. Equity method goodwill is not amortized or tested for impairment. Instead the total equity method investment balance, including equity method goodwill, is tested for impairment. We review for impairment whenever factors indicate that the carrying amount of the investment might not be recoverable. In such a case, the decrease in value is recognized in the period the impairment occurs in the Consolidated Statement of Income.

Current wording

investment and the underlying equity in net assets of the investment and are generally amortized over the lives of the related assets that gave rise to them. Equity method goodwill is not amortized or tested for impairment. Instead the total equity method investment balance, including equity method goodwill, is tested for impairment. We review for impairment whenever factors indicate that the carrying amount of the investment might not be recoverable. In such a case, the decrease in value is recognized in the period the impairment occurs in the Consolidated Statement of Operations.

Previous wording

The following tables set forth statements of income, also expressed as a percentage of revenue, for the three and nine months ended March 31, 2024 and 2023. Our historical results of operations are not necessarily indicative of the results for any future period.

Current wording

The following tables set forth statements of income (loss), also expressed as a percentage of revenue, for three months ended September 30, 2024 and 2023. Our historical results of operations are not necessarily indicative of the results for any future period.

Previous wording

Total revenue was $150.1 million for the three months ended March 31, 2024, an increase of $17.5 million, or 13.2%, as compared to $132.6 million for the same quarter last year. The increase was primarily due to an increase of $12.9 million and $2.6 million in sales of power discrete products and sales of power IC products, respectively, as well as an increase of $1.4 million in license and development services. The increase in power discrete and power IC product sales was primarily due to a 46.9% increase in unit shipments, partially offset by a 23.7% decrease in average selling prices compared to same quarter last year due to a shift in product mix. The increase in revenues was primarily driven by a significant increase in the computing markets, particularly in notebook and motherboard products, partially offset by decreased sales in the consumer market, particularly in gaming products. The revenue of packaging and testing services and other for the three months ended March 31, 2024, as compared to same quarter last year, remained flat. The increase in license and development services for the three months ended March 31, 2024 was related to the license agreement signed in February 2023 with a customer to license our proprietary SiC technology and to provide 24-month engineering and development services.

Current wording

Total revenue was $181.9 million for the three months ended September 30, 2024, an increase of $1.3 million, or 0.7%, as compared to $180.6 million for the same quarter last year. The increase was primarily due to an increase of $1.0 million and $0.2 million in sales of power discrete products and sales of power IC products, respectively. The increase in power discrete and power IC product sales was primarily due to a 15.8% increase in unit shipments, partially offset by a 13.1% decrease in average selling prices compared to same quarter last year due to a shift in product mix. The increase in revenues was primarily driven by a significant increase in the computing markets, particularly in artificial intelligence and tablet products, as well as an increase in the communication markets, particular in battery, partially offset by a decrease in power supply and industrial markets, particularly in quick chargers. The revenue of packaging and testing services and other for the three months ended September 30, 2024, as compared to same quarter last year, remained flat. The license and development services for the three months ended September 30, 2024 and 2023 was related to the license agreement signed in February 2023 with a customer to license our proprietary SiC technology and to provide 24-month engineering and development services.

Previous wording

Cost of goods sold was $365.5 million for the nine months ended March 31, 2024, a decrease of $9.3 million, or 2.5%, as compared to $374.8 million for the same period last year. The decrease was primarily due to 6.4% decrease in revenue. Gross margin decreased by 2.9 percentage points to 26.3% for the nine months ended March 31, 2024, as compared to 29.2% for the same period last year. The decrease in gross margin was primarily due to higher material costs and less favorable product mix during the periods.

Current wording

Cost of goods sold was $137.4 million for the three months ended September 30, 2024, an increase of $7.7 million or 5.9%, as compared to $129.7 million for the same quarter last year. The increase was primarily due to 0.7% increase in revenue. Gross margin decreased by 3.7 percentage points to 24.5% for the three months ended September 30, 2024, as compared to 28.2% for the same quarter last year. The decrease in gross margin was primarily due to higher material costs and less favorable product mix during the three months ended September 30, 2024.

Previous wording

Selling, general and administrative expenses were $23.0 million for the three months ended March 31, 2024, an increase of $0.4 million, or 1.6%, as compared to $22.6 million for the same quarter last year. The increase was primarily due to a $0.2 million increase in employee compensation and benefits expenses primarily due to increased headcount and higher bonus expense, offset by lower business insurance expenses, a $0.4 million increase in consulting fees and a $0.9 million increase in allocation, partially offset by a $0.8 million decrease in share-based compensation expense as a result of a cancellation of performance-based restricted stock units and a modification of market-based restricted stock units in September 2023 quarter and $0.4 million decrease in legal fees.

Current wording

Selling, general and administrative expenses were $22.3 million for the three months ended September 30, 2024, an increase of $2.9 million, or 14.8%, as compared to $19.4 million for the same quarter last year. The increase was primarily due to a $3.3 million increase in share-based compensation expense as a result of a modification of market-based restricted stock units in August 2024, and $0.2 million increase in employee compensation and benefits expenses primarily due to increased headcount, partially offset by a $0.4 million decrease in audit fees, a $0.2 million decrease in legal fees and $0.1 million decrease in consulting fees.

Previous wording

Other income (loss), net increased in the three and nine months ended March 31, 2024 as compared to the same periods last year primarily due to decrease in foreign currency exchange loss as a result of the appreciation of RMB against USD.

Current wording

Other income (loss), net decreased by $0.7 million in the three months ended September 30, 2024 as compared to the same period last year primarily due to $0.1 million of an impairment of a privately-held investment, as well as an increase in foreign currency exchange loss as a result of the depreciation of RMB against USD.

Previous wording

Interest income (expense), net increased by $0.3 million during the three months ended March 31, 2024 as compared to the same quarter last year primarily due to a $0.3 million decrease in interest expense as a result of less outstanding loan balance in current quarter.

Current wording

Interest income (expense), net increased by $0.2 million during the three months ended September 30, 2024 as compared to the same quarter last year primarily due to lower interest expense as a result of less outstanding loan balance in current quarter.

Previous wording

The Company recognized income tax expense of approximately $0.6 million and $2.5 million for the three months ended March 31, 2024 and 2023, respectively. The income tax expense of $0.6 million for the three months ended March 31, 2024 included a $0.1 million discrete tax expense. The income tax expense of $2.5 million for the three months ended March 31, 2023 included a $0.03 million discrete tax expense. Excluding the discrete income tax items, the income tax expense for the three months ended March 31, 2024 and 2023 was $0.6 million and $2.5 million, respectively, and the effective tax rate for the three months ended March 31, 2024 and 2023 was (5.3)% and (15.2)%, respectively. The changes in the tax expense and effective tax rate between the periods resulted primarily from changes in the mix of earnings in various geographic jurisdictions between the current year and the same period of last year as well as from reporting pretax book loss of $10.6 million for the three months ended March 31, 2024 as compared to $16.4 million of pretax book loss for the three months ended March 31, 2023.

Current wording

The Company recognized income tax expense of approximately $1.0 million and $1.1 million for the three months ended September 30, 2024 and 2023, respectively. The income tax expense of $1.0 million for the three months ended September 30, 2024 included a $0.08 million discrete tax expense. The income tax expense of $1.1 million for the three months ended September 30, 2023 included a $0.05 million discrete tax expense. Excluding the discrete income tax items, the income tax expense for the three months ended September 30, 2024 and 2023 was $1.0 million and $1.1 million, respectively, and the effective tax rate for the three months ended September 30, 2024 and 2023 was (65.8)% and 15.7%, respectively. The changes in the tax expense and effective tax rate between the periods resulted primarily from changes in the mix of earnings in various geographic jurisdictions between the current year and the same period of last year as well as from reporting pretax book loss of $1.5 million for the three months ended September 30, 2024 as compared to $6.9 million of pretax book income for the three months ended September 30, 2023.

Previous wording

The Company's income tax returns are subject to examinations by the Internal Revenue Service and other tax authorities in various jurisdictions. In accordance with the guidance on the accounting for uncertainty in income taxes, the Company regularly assesses the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of its provision for income taxes. These assessments can require considerable estimates and judgments. As of March 31, 2024, the gross amount of unrecognized tax benefits was approximately $9.5 million, of which $6.4 million, if recognized, would reduce the effective income tax rate in future periods. If the Company's estimate of income tax liabilities proves to be less than the ultimate assessment, then a further charge to expense would be required. If events occur and the payment of these amounts ultimately proves to be unnecessary, the reversal of the liabilities would result in tax benefits being recognized in the period when the Company determines the liabilities are no longer necessary. The Company does not anticipate any material changes to its uncertain tax positions during the next twelve months.

Current wording

The Company's income tax returns are subject to examinations by the Internal Revenue Service and other tax authorities in various jurisdictions. In accordance with the guidance on the accounting for uncertainty in income taxes, the Company regularly assesses the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of its provision for income taxes. These assessments can require considerable estimates and judgments. As of September 30, 2024, the gross amount of unrecognized tax benefits was approximately $10.1 million, of which $6.9 million, if recognized, would reduce the effective income tax rate in future periods. If the Company's estimate of income tax liabilities proves to be less than the ultimate assessment, then a further charge to expense would be required. If events occur and the payment of these amounts ultimately proves to be unnecessary, the reversal of the liabilities would result in tax benefits being recognized in the period when the Company determines the liabilities are no longer necessary. The Company does not anticipate any material changes to its uncertain tax positions during the next twelve months.

Previous wording

In March 2024, one of the Company's subsidiaries in China entered into a line of credit facility with Bank of Communications Limited in China. The purpose of the credit facility is to provide working capital borrowings. The Company could borrow up to approximately RMB 140 million or $19.4 million based on currency exchange rate between RMB and U.S. Dollar on March 31, 2024 with a maturity date of March 15, 2025. As of March 31, 2024, there wasno outstanding balance for this loan.

Current wording

subsidiaries in China. The purpose of the credit facility is to provide working capital borrowings. The Company could borrow up to approximately RMB 140 millionor $20.0 million based on currency exchange rate between RMB and U.S. Dollar on September 30, 2024 with a maturity date of March 15, 2025. As of September 30, 2024, there wasno outstanding balance for this loan.

Previous wording

In December 2023, one of the Company's subsidiaries in China entered into a line of credit facility with Industrial and Commercial Bank of China. The purpose of the credit facility was to provide working capital borrowings. The Company could borrow up to approximately RMB 72.0 million, or $10.2 million based on currency exchange rate between RMB and U.S. Dollar on December 31, 2023, with a maturity date of December 31, 2024. As of March 31, 2024, there was no outstanding balance for this loan.

Current wording

subsidiaries in China. The purpose of the credit facility was to provide working capital borrowings. The Company could borrow up to approximately RMB 72.0 million, or $10.3 million based on currency exchange rate between RMB and U.S. Dollar on September 30, 2024, with a maturity date of December 31, 2024. As of September 30, 2024, there was no outstanding balance for this loan.

Previous wording

In September 2023, one of the Company's subsidiaries in China entered into a line of credit facility with China Construction Bank. The purpose of the credit facility is to provide working capital borrowings. The Company could borrow up to approximately RMB 50 million or $6.8 million based on currency exchange rate between RMB and U.S. Dollar on September 30, 2023 with a maturity date of September 8, 2025. As of March 31, 2024, there was no outstanding balance for this loan.

Current wording

China. The purpose of the credit facility is to provide working capital borrowings. The Company could borrow up to approximately RMB 50 million or $7.1 million based on currency exchange rate between RMB and U.S. Dollar on September 30, 2024 with a maturity date of September 8, 2025. As of September 30, 2024, there was no outstanding balance for this loan.

Previous wording

On February 6, 2023, we entered into a license and engineering service agreement with a leading power semiconductor automotive supplier related to our Silicon Carbide (SiC) MOSFET and diode technology. Pursuant to the agreement, we license and provide 24-month engineering support for our proprietary SiC technology to the supplier for a total fee of $45.0 million, consisted of an upfront fees of $18.0 million, $6.8 million and $9.0 million paid to us in the March, July 2023 and February 2024, respectively, and the remaining amount to be paid upon our achievements of specified business and product milestones. In addition, we entered an accompanying supply agreement with the supplier to provide it with limited wafer supply.

Current wording

On February 6, 2023, we entered into a license and engineering service agreement with a leading power semiconductor automotive supplier related to our Silicon Carbide (SiC) MOSFET and diode technology. Pursuant to the agreement, we license and provide 24-month engineering support for our proprietary SiC technology to the supplier for a total fee of $45.0 million, consisted of an upfront fee and milestone payments of $18.0 million, $6.8 million and $9.0 million paid to us in the March, July 2023 and February 2024, respectively, and the remaining amount to be paid upon our achievements of specified business and product milestones. In addition, we entered an accompanying supply agreement with the supplier to provide it with limited wafer supply.

Previous wording

In September 2021, Jireh Semiconductor Incorporated (“Jireh”), one of the wholly-owned subsidiaries, entered into a financing arrangement agreement with a company (“Lender”) for the lease and purchase of a machinery equipment manufactured by a supplier. This agreement has a 5 years term, after which Jireh has the option to purchase the equipment for $1. The implied interest rate was 4.75% per annum which was adjustable based on every five basis point increase in 60-month U.S. Treasury Notes, until the final installation and acceptance of the equipment. The total purchase price of this equipment was euro 12.0 million. In April 2021, Jireh made a down payment of euro 6.0 million, representing 50% of the total purchase price of the equipment, to the supplier. In June 2022, the equipment was delivered to Jireh after Lender paid 40% of the total purchase price, for euro 4.8 million, to the supplier on behalf of Jireh. In September 2022, Lender paid the remaining 10% payment for the total purchase price and reimbursed Jireh for the 50% down payment, after the installation and configuration of the equipment. The title of the equipment was transferred to Lender following such payment. The agreement was amended with fixed implied interest rate of 7.51% and monthly payment of principal and interest effective in October 2022. Other terms remain the same. In addition, Jireh purchased hardware for the machine under this financing arrangement. The purchase price of this hardware was $0.2 million. The financing arrangement is secured by this equipment and other equipment which had the net book value of $14.0 million as of March 31, 2024. As of March 31, 2024, the outstanding balance of this debt financing was $9.8 million.

Current wording

In September 2021, Jireh Semiconductor Incorporated (“Jireh”), one of the wholly-owned subsidiaries, entered into a financing arrangement agreement with a company (“Lender”) for the lease and purchase of a machinery equipment manufactured by a supplier. This agreement has a 5 years term, after which Jireh has the option to purchase the equipment for $1. The implied interest rate was 4.75% per annum which was adjustable based on every five basis point increase in 60-month U.S. Treasury Notes, until the final installation and acceptance of the equipment. The total purchase price of this equipment was euro 12.0 million. In April 2021, Jireh made a down payment of euro 6.0 million, representing 50% of the total purchase price of the equipment, to the supplier. In June 2022, the equipment was delivered to Jireh after Lender paid 40% of the total purchase price, for euro 4.8 million, to the supplier on behalf of Jireh. In September 2022, Lender paid the remaining 10% payment for the total purchase price and reimbursed Jireh for the 50% down payment, after the installation and configuration of the equipment. The title of the equipment was transferred to Lender following such payment. The agreement was amended with fixed implied interest rate of 7.51% and monthly payment of principal and interest effective in October 2022. Other terms remain the same. In addition, Jireh purchased hardware for the machine under this financing arrangement. The purchase price of this hardware was $0.2 million. The financing arrangement is secured by this equipment and other equipment which had the net book value of $13.2 million as of September 30, 2024. As of September 30, 2024, the outstanding balance of this debt financing was $8.5 million.

Previous wording

On August 18, 2021, Jireh entered into a term loan agreement with a financial institution (the "Bank") in an amount up to $45.0 million for the purpose of expanding and upgrading the Company’s fabrication facility located in Oregon. The obligation under the loan agreement is secured by substantially all assets of Jireh and guaranteed by the Company. The agreement has a 5.5 year term and matures on February 16, 2027. Jireh is required to make consecutive quarterly payments of principal and interest. The loan accrues interest based on adjusted Secured Overnight Financing Rate ("SOFR)" plus the applicable margin based on the outstanding balance of the loan. This agreement contains customary restrictive covenants and includes certain financial covenants that the Company is required to maintain. Jireh drew down $45.0 million on February 16, 2022 with the first payment of principal beginning in October 2022. As of March 31, 2024, Jireh was in compliance with these covenants andthe outstanding balance of this loan was $31.5 million.

Current wording

On August 18, 2021, Jireh entered into a term loan agreement with a financial institution (the “Bank”) in an amount up to $45.0 million for the purpose of expanding and upgrading the Company’s fabrication facility located in Oregon. The obligation under the loan agreement is secured by substantially all assets of Jireh and guaranteed by the Company. The agreement has a 5.5 year term and matures on February 16, 2027. Jireh is required to make consecutive quarterly payments of principal and interest. The loan accrues interest based on adjusted SOFR plus the applicable margin based on the outstanding balance of the loan. This agreement contains customary restrictive covenants and includes certain financial covenants that the Company is required to maintain. Jireh drew down $45.0 million on February 16, 2022 with the first payment of principal beginning in October 2022. As of September 30, 2024, Jireh was in compliance with these covenants andthe outstanding balance of this loan was $27.0 million.

Previous wording

On August 9, 2019, one of the Company's wholly-owned subsidiaries (the “Borrower”) entered into a factoring agreement with the Hongkong and Shanghai Banking Corporation Limited (“HSBC”), whereby the Borrower assigns certain of its accounts receivable with recourse. This factoring agreement allows the Borrower to borrow up to 70% of the net amount of its eligible accounts receivable of the Borrower with a maximum amount of $30.0 million. The interest rate is based on the SOFR plus 2.01% per annum. The Company is the guarantor for this agreement. The Company is accounting for this transaction as a secured borrowing. In addition, any cash held in the restricted bank account controlled by HSBC has a legal right of offset against the borrowing. This agreement, with certain financial covenants required, has no expiration date. On August 11, 2021, the Borrower signed an agreement with HSBC to reduce the borrowing maximum amount to $8.0 million with certain financial covenants required. Other terms remain the same. As of March 31, 2024, the Borrower was in compliance with these covenants. As of March 31, 2024, there was no outstanding balance and the Company had unused credit of approximately $8.0 million.

Current wording

On August 9, 2019, one of the Company's wholly-owned subsidiaries (the “Borrower”) entered into a factoring agreement with Hongkong and Shanghai Banking Corporation Limited (“HSBC”), whereby the Borrower assigns certain of its accounts receivable with recourse. This factoring agreement allows the Borrower to borrow up to 70% of the net amount of its eligible accounts receivable of the Borrower with a maximum amount of $30.0 million. The interest rate is based on the Secured Overnight Financing Rate (“SOFR”), plus 2.01% per annum. The Company is the guarantor for this agreement. The Company is accounting for this transaction as a secured borrowing. In addition, any cash held in the restricted bank account controlled by HSBC has a legal right of offset against the borrowing. This agreement, with certain financial covenants required, has no expiration date. On August 11, 2021, the Borrower signed an agreement with HSBC to reduce the borrowing maximum amount to $8.0 million with certain financial covenants required. Other terms remain the same. As of September 30, 2024, the

Previous wording

We believe that our current cash and cash equivalents and cash flows from operations will be sufficient to meet our anticipated cash needs, including working capital and capital expenditures, for at least the next twelve months. In the long-term, we may require additional capital due to changing business conditions or other future developments, including any investments or acquisitions we may decide to pursue. If our cash is insufficient to meet our needs, we may seek to raise capital through equity or debt financing. The sale of additional equity securities could result in dilution to our shareholders. The incurrence of indebtedness would result in increased debt service obligations and may include operating and financial covenants that would restrict our operations. We cannot be certain that any financing will be available in the amounts we need or on terms acceptable to us, if at all.

Current wording

We believe that our current cash and cash equivalents and cash flows from operations will be sufficient to meet our anticipated cash needs, including working capital and capital expenditures, for at least the next twelve months. In the long-term, we may require additional capital due to changing business conditions or other future developments, including any investments or acquisitions we may decide to pursue. If our cash is insufficient to meet our needs, we may seek to raise capital through debt financing. The incurrence of indebtedness would result in increased debt service obligations and may include operating and financial covenants that would restrict our operations. If we decide to raise capital through equity financing, the issuance of additional equity may result in dilution to our shareholders. We cannot be certain that any financing will be available in the amounts we need or on terms acceptable to us, if at all.

Previous wording

As of March 31, 2024 and June 30, 2023, we had $174.6 million and $195.6 million of cash, cash equivalents and restricted cash, respectively. Our cash, cash equivalents and restricted cash primarily consist of cash on hand, restricted cash, and short-term bank deposits with original maturities of three months or less. Of the $174.6 million and $195.6 million cash, cash equivalents and restricted cash, $89.2 million and $108.2 million, respectively, are deposited with financial institutions outside the United States.

Current wording

As of September 30, 2024 and June 30, 2024, we had $176.2 million and $175.5 million of cash, cash equivalents and restricted cash, respectively. Our cash, cash equivalents and restricted cash primarily consist of cash on hand, restricted cash, and short-term bank deposits with original maturities of three months or less. Of the $176.2 million and $175.5 million cash, cash equivalents and restricted cash, $92.7 million and $55.0 million, respectively, are deposited with financial institutions outside the United States.

Previous wording

Net cash provided by operating activities of $48.7 million for the nine months ended March 31, 2023 resulted primarily from net income of $13.5 million and non-cash expenses of $63.2 million, partially offset by net changes in assets and liabilities using cash of $28.0 million, The non-cash expenses of $63.2 million primarily included $34.1 million of share-based compensation expense, $31.2 million of depreciation and amortization expenses, $0.4 million of loss on disposal of property and equipment, $1.5 million of income from equity investment and $1.0 million of deferred income taxes. The net changes in assets and liabilities of $28.0 million were primarily due to a $10.6 million decrease in net payable to equity investee, a $21.6 million decrease in accounts payable due to timing of payments, a $21.7 million increase in inventories as a result of our inventories built up for preparation of uncertainty of supply chains, $7.8 million increase in other current and long-term assets due to increase in advance payments to vendors, and a $29.4 million decrease in accrued and other liabilities, partially offset by a $46.2 million decrease in accounts receivable as a result of timing of the shipments and payments collected, a $14.4 million increase in deferred revenue, and a $2.5 million increase in income taxes payable.

Current wording

Net cash provided by operating activities of $11.0 million for the three months ended September 30, 2024 resulted primarily from net loss of $2.5 million and non-cash expenses of $22.4 million, partially offset by net changes in assets and liabilities using cash of $8.8 million. The non-cash expenses of $22.4 million primarily included $6.9 million of share-based compensation expense, $14.6 million of depreciation and amortization expenses, $1.0 million of loss from equity investment, $0.1 million of impairment of a privately-held investment and $0.2 million of deferred income taxes. The net changes in assets and liabilities of $8.8 million were primarily due to a $12.0 million increase in accounts receivable as a result of timing of the shipments and payments collected, a $3.1 million increase in contract assets, a $0.1 million increase in other current and long-term assets due to increase in advance payments to vendors, a $2.6 million decrease in deferred revenue, a $4.7 million decrease in accrued and other liabilities, and a $1.5 million decrease in accounts payable due to timing of payments, partially offset by $10.8 million decrease in inventories, a $3.5 million increase in net payable to equity investee, and $0.6 million increase in income taxes payable.

Previous wording

Net cash used in investing activities of $90.6 million for the nine months ended March 31, 2023 was primarily attributable to $91.3 million in purchases of property and equipment, partially offset by $0.6 million government grants related to fixed assets.

Current wording

Net cash used in investing activities of $6.7 million for the three months ended September 30, 2024 was primarily attributable to $6.9 million in purchases of property and equipment, partially offset by $0.2 million government grants related to equipment.

Previous wording

Net cash used in financing activities of $10.9 million for the nine months ended March 31, 2024 was primarily attributable to $8.6 million in repayments of borrowings, $0.6 million in payment of finance lease obligations, and $7.3 million in common shares acquired to settle withholding tax related to vesting of restricted stock units, partially offset by $5.7 million of proceeds from exercise of stock options and ESPP.

Current wording

Net cash used in financing activities of $3.7 million for the three months ended September 30, 2024 was primarily attributable to $2.9 million in repayments of borrowings, $0.2 million in payment of finance lease obligations, and $0.7 million in common shares acquired to settle withholding tax related to vesting of restricted stock units, partially offset by $0.1 million of proceeds from exercise of stock options.